Many Gaza civil servants had not worked since the Islamist movement Hamas came to power in 2007, the auditors added.

Hamas, which won parliamentary elections the previous year, ousted forces loyal to Palestinian Authority (PA) President Mahmoud Abbas and his Fatah faction, and set up a rival government.

Israel subsequently tightened its blockade of the territory, with Egypt's co-operation, to weaken Hamas and end rocket attacks.

The move has contributed to the 1.7 million people in Gaza suffering severe socio-economic hardship, with 80% dependent on aid.

Lack of transparency

The EU pays about one-fifth of the salaries of the PA's 170,000 civil servants, both in the West Bank and Gaza, under a programme known as Pegase.

Hans Gustaf Wessberg of the European Court of Auditors said overall EU funding had played an important role in supporting vulnerable families, and maintaining health and education services in Palestinian areas.

They are victims of a military coup, and they have families to feed... We can't throw them in the streetAhmed Majdalani, Palestinian Labour Minister

But he pointed out that "the payment of civil servants who do not work does not meet one of [the EU's] main objectives to provide public services to the Palestinian people".

When Hamas took control of Gaza, President Abbas decided to keep paying the salaries of the estimated 61,000 civil servants and members of the security forces who stopped reporting for the jobs, so long as they stayed home and did not work for the rival administration.

The European auditors did not have overall figures for the number of civil servants in Gaza who were currently not working, but they found that in one office 90 out of the 125 staff were absent.

The auditors also said they had identified weaknesses in the European Commission's methods for allocating EU funds.

Their report said it was unclear what had happened to 90m euros allocated to pay for fuel taxes and keep Gaza's only power plant running.

The territory is currently facing an electricity crisis because a shortage of fuel forced the plant to shut down on 1 November. This has caused blackouts lasting 12 to 16 hours a day, disrupted health services and sent raw sewage flooding into the streets.

"In Gaza, the audit found that salaries were being paid to large numbers of beneficiaries who were not working due to the political situation. The situation in Gaza made it difficult for the Commission to carry out on‑the‑spot controls and ensure that rent‑seeking was not taking place," the auditors said.

The European Commission says it is important to continue providing political support for the PA, and that includes paying salaries. But it also admits that it is hard to gauge which civil servants are still working.

Palestinian Labour Minister Ahmed Majdalani defended paying them all.

"The issue is political, legal and human. Those are government employees first, and they are victims of a military coup, and they have families to feed. We can't throw them in the street,'' he told the Associated Press.

Faisal Abu Shahla, a Fatah leader in Gaza, said the civil servants had "responded to the orders of the leadership to stay home, and they are ready to resume their duties when the leadership orders them to do so".

Pegase is the EU's biggest support programme for the Palestinian territories. In total, the EU has provided more than 5.6bn euros in assistance to the Palestinians since 1994 and remains the biggest donor.